The Beer Market in the Republic of Korea - Awex Export
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The Beer Market in the Republic of Korea
By SONG, Jung Min, November 2019
AWEX-HUB SEOUL 2019 Page 1/16South Korea is the 11th largest beer market in the world. The Korean beer market is worth 15.977 Million USD1. The Korean beer market continues to
grow and more importantly, the growth rate for imported beer is higher than the growth rate for Korean beers. The beer imports reached 263 million
USD in 2017, which is more than a 500 % increase compared to 20102. The consumers’ wish to get a wider choice of beers and the competitive
pricing of imported beers resulted in a boom of beer imports into Korea. However, although Korea is a growing market, there are challenges for the
Belgian brewers who want to export to Korea, such as fierce competition between imported beers and a dominant market-share of famous imported
beers (and a market dominance of key importers). There is also uncertainty which stems from a planned reform of the liquor tax.
The World Beer Markets: Korea is 11th in the world (2018) Unit: US$ million / retail value sales, Source: Euromonitor International 2018
Nr. Countries 2013 2017 2018 2020(Estimation)
1 China 66,341.10 84,728.30 91,086.30 121,571.10
2 USA 96,237.70 103,990.70 106,459.60 118,810.40
3 Brazil 30,057.60 42,864.00 45,626.40 61,164.80
4 Japan 37,324.50 37,264.30 37,117.80 37,737.80
5 Germany 30,788.90 31,784.70 32,335.60 34,359.30
6 Mexico 14,439.30 21,587.80 23,712.90 31,554.50
7 UK 25,906.30 26,761.60 27,599.10 30,906.10
8 Russia 17,129.70 19,646.30 20,361.70 22,625.00
9 Australia 13,153.60 15,443.10 16,579.40 22,050.00
10 Spain 14,621.90 16,314.10 17,156.50 20,882.70
11 South Korea 12,296.90 15,124.30 15,977.70 19,272.50
World 542,291.20 660,576.20 696,198.60 865,814.50
1
Source: Euromonitor International 2018, Unit: US$ million / retail value sales
2
Source: Korea Customs Service, Korea international trade association
AWEX-HUB SEOUL 2019 Page 2/16Contents of this Report 1. The South Korean beer market in the past .................................................................................................. 4 2. The recent growth of the market for imported beers ........................................................................... 5 3. Driving forces of the growth ................................................................................................................................ 6 4. Main distribution channels for the imported beers ................................................................................ 8 5. Distribution structure ............................................................................................................................................. 10 6. Competition among the importers of beer .............................................................................................. 11 7. Import tariffs and other taxes on imported beer ................................................................................. 12 8. Related trade fairs and business federations ........................................................................................... 14 9. Current issues and trends .................................................................................................................................... 16 AWEX-HUB SEOUL 2019 Page 3/16
1. The South Korean beer market in the past
The South Korean beer market used to be dominated by two large local breweries: HiteJinro (https://en.hitejinro.com/) and Oriental Brewery 3
(https://www.ob.co.kr/). Those two leading breweries focused on brewing beers which were suitable for mass production. There were only a few
other local brewers who could compete with them, not to mention foreign beers.
However, the market situation has changed dramatically in recent years, through the arrival of new brewers and because of a boom of beer imports.
This has led to more competition and to a wider choice available for consumers. For example, Lotte Chilsung started with its own beer brewing in
2014 (www.kloudbeer.com). Also, the market share of foreign beers raised. The increased competition from new breweries and from imports, in
turn, led the local established companies to extend their product line by developing new beers and also by entering the beer-importing-business.
[Three Leading local brewers and their main products, both manufactured and imported]
Company Major Local Brands Brands that the company imports
Budweiser, Hoegaarden, Corona, Beck’s, Stella Artois, Leffe, Löwenbräu,
OB Cass, OB, Cafri
Suntory
Hite-Jinro Hite, Max, Stout, Filite Carlsberg, Kirin, Singha, Kronenbourg, Tooheys Brothers
Lotte Chilsung Kloud, Fitz Miller, Coors, Bluemoon, Asahi
3
Oriental Brewery or OB is a South Korean company which is currently owned by AB InBev and which was initially founded by the Doosan Group.
AWEX-HUB SEOUL 2019 Page 4/162. The recent growth of the market for imported beers
In 2012 the Economist wrote that North Korea's Taedonggang beer tasted better than South Korean beers.4 This article wanted to highlight a
discrepancy between the changing consumer tastes and the beers which were then available in the South Korean market.
A lot has changed since. The market share of the imported beer has increased significantly, up from 3.9% in 2012 to 22.6% in 2018.
[Market Share of the Local and Imported Beers]
Local Imported
100.0%
80.0%
60.0%
40.0% 30.3%
22.6%
16.8%
20.0% 8.5% 11.2%
3.9% 4.9% 6.1%
0.0%
2012 2013 2014 2015 2016 2017 2018 2019
Source: Ohmy News, 27th May 2019: https://news.naver.com/main/read.nhn?oid=047&aid=0002228373 (Figures for 2018 and for 2019 are estimations)
4
Source : Economist, “Brewing in South Korea, Fiery food, boring beer” (2012.11.24, ) (https://www.economist.com/business/2012/11/24/fiery-food-
boring-beer)
AWEX-HUB SEOUL 2019 Page 5/163. Driving forces of the growth
The growth of the imported beer can be explained in two ways:
a) Changing consumer preferences towards more premium quality and towards various/rich flavored beers: South Korean consumers,
especially young generations, like to try new, premium, foreign beers and they are the driving force in the market. They consider imported
beers, especially from Belgium and from Germany, as better in taste and brand. In addition, some imported beers are cheaper than the local
ones, or at least cost effective. A survey conducted by KCA5 on the consumers’ motivation for purchasing import beers depicts the image
of import beers among Korean consumers.
[Main reason for purchasing Import beers]
8%
Taste Cost-effectivness
13.6%
48.0%
14.4% Price Brand
16.0% Others
(Source: Korea Consumer agency’s report on current situation on the imported processed food’s price and distribution)
5
KCA : Korea Consumer agency: http://english.kca.go.kr/index.do
AWEX-HUB SEOUL 2019 Page 6/16b) Competitive Prices: FTA + fierce competition: The free trade agreements that Korea has signed (with the EU, with China, with the USA etc.)
lowered the cost of beer imports and encouraged more people to enter the beer-importing-business. After the free trade agreement between
the EU and Korea, the number of importers importing beer from the EU increased almost three times, from 64 in 2011 to 178 in 2017.
[Number of beer importer before and after FTA]
200 178
Before FTA in
150
'10~'11
100
64
49
50 30 After FTA in '17
11
0
0
USA EU China
(Source: Korea Consumer agency’s report on current situation on the imported processed food’s price and distribution)
The more import-beers enter the Korean market, the more the competition among imported beers becomes fierce and the more impact it has
on lowering consumer prices. Promotional events like the ‘Four foreign beers for 10,000 Won’ at convenience stores is a well- known price-
promotion. The costs of the promotions are shared on a fifty-fifty basis between the importers and the retailers. The importers said that
their sales are heavily influenced by the promotion. If they do not take part in the price-promotion, their sales decrease by 90%6. However,
please note that the convenience stores mostly carry big well-known brands of imported beers (Hoegaerden etc.) so that the promotions only
benefit those imported beers.
6
Source: Korea Consumer agency’s report on the current situation on the imported processed food’s price and distribution.
AWEX-HUB SEOUL 2019 Page 7/16[Import Beer Promotions: “Four foreign beers for 10,000 Won”]
4. Main distribution channels for the imported beers
The main distribution channels for the imported beers are hypermarkets and convenience stores. Although the market share of imported beers
is still less than thirty percent of the total Korean beer market, the sales contribution of the imported beers in those retail stores (convenience
stores and hypermarkets) is over fifty percent.
[Market share of the import beer in retail stores] (Unit: %)
Type Company 2015 2016 2017 2018
E-mart 38.1 43.4 50.9 54.3 (Apr.)
Hypermarket
Lotte Mart 34.5 40 51.1 (Jan~Jul)
GS25 46.8 54.8 57.2 (May)
CVS
CU 41.7 48.2 56.7 60.2 (Jan~Feb)
(Source: Korea Consumer agency’s report on current situation on the imported processed food’s price and distribution)
AWEX-HUB SEOUL 2019 Page 8/16 Hypermarkets: The hypermarkets offer a wide range of imported beers. The number of beer brands which are sold in the hypermarkets
increased significantly.
[Number of beers sold in the hypermarket]
2016 2018 Increase (%)
E-mart 410 715 74%
Lotte Mart 350 400 14%
Home plus 302 334 11%
(Source: Korea Consumer agency’s report on current situation on the imported processed food’s price and distribution)
• Convenience stores: Convenience stores have mostly an only limited product range. They carry large beer brands like Stella, Leffe, Hoegaarden
(for Belgian beers). There are about 33.000 convenience stores in Korea 7. The convenience store chains ‘CU’, ‘GS25’ and ‘7-Eleven’ together
represent about 25.000 stores. ‘CU’ alone has 13.500 stores.
Specialized beer shops: The number of specialized beer shops is increasing, especially in neighborhoods with many foreigners, student areas
and trendy areas/places in town. They mostly offer specialty beers from local microbreweries and foreign specialty beers from Belgium, the
USA, Canada, the Czech Republic and Germany.
7
‘Nearly half of the convenience stores suffer deficit’: www.koreaherald.com/view.php?ud=20191008000726&ACE_SEARCH=1
AWEX-HUB SEOUL 2019 Page 9/165. Distribution structure
The distribution process of imported beers is as below:
Wholesaler Restaurant/bar 30%
Foreign
Beer Importer Consumer
Company
Retail Stores
Hypermarket
70%
CVS
Others
- Only the licensed liquor importers are allowed to import alcoholic beverages.
- Big retail companies like E-mart and Lotte import beers directly from the foreign manufacturers and distribute those beers in their stores.
- Importers can sell beers to both wholesalers and to retailers.
- Importers are not allowed to sell directly to restaurants/bars.
- Imported beer consumed through B-to-C channels (retail stores) represents about 70% of the market.
- On limited occasions, importers can sell directly to customers, but it is very rare. (At the SIWS trade fair, importers can sell beers to the visitors.)
- Online shopping is very popular in Korea8, but it is forbidden to sell alcoholic beverage through online channels, except for Korean traditional
alcoholic beverage. But alcohol-free-beer is allowed to sell through E-commerce. This could be a potential for Belgian brewers.
8
‘Hyundai Department Store sells via Coupang’: www.koreatimes.co.kr/www/tech/2019/09/129_275299.html
AWEX-HUB SEOUL 2019 Page 10/166. Competition among the importers of beer
There are an estimated 200 beer importers in Korea. The top ten importers account for about 85% of the beer-imports in Korea9.
Beer importers can be classified into three categories and their market share in 2016 is as below:
Category Market share Company name
Domestic Brewers who also 38% OB, Lotte, Hite-Jinro
import beer
Foreign brewers’ local branch 31% Heineken Korea, AE Brand Kore…
Other Korean beer importers BK, …
(Source: Korea Consumer agency’s report presented at the Korea institute of Public Finance)
Major Beer importers and their ranking (source: KWSIA)
1. OB
2. Lotte Asahi (www.asahibeerk.com)
3. BK (www.beerkorea.net)
4. Heineken Korea
5. Hite Jinro
6. AE Brand Korea
7. Diageo Korea (https://www.diageo.com/)
8. Msbeverage (http://www.sapporobeer.kr/msbeverage.html)
9
Source : Korea Wines & Spirits Importers Association (www.kwsia.or.kr)
AWEX-HUB SEOUL 2019 Page 11/167. Import tariffs and other taxes on imported beer
Import Tariffs
Under the Free trade agreement between the EU and Korea, imported beers from Belgium are subject to a 0% import-tariff-rate. Belgian brewers
should apply for the status of approved exporter* so that their Korean importer can benefit from the 0% tariff-rate. Otherwise, the importer will
have to pay a 30% tariff, unless the Belgian brewer exports consignments with a total value which does not exceed 6.000 EUR. If the value does not
exceed 6.000 EUR, there is no need for the exporter to get the ‘approved exporter’ status, as any exporter can then make the origin declaration.
[Import tariff on Beer imported from EU, USA, China and, Japan]
EU USA China Japan
2015 11.20% 12.8% 30.0% 30.0%
2016 7.50% 8.5% 27.0% 30.0%
2017 3.70% 4.2% 25.5% 30.0%
2018 0% 0.0% 24.0% 30.0%
*Belgian brewers should contact their Belgian customs office to get the status of approved exporter under the Korea/EU FTA. Once the Belgian brewer
has an approved exporter number, the Korean importer can benefit from the zero custom tariffs on beer, which apply for the Korea-EU Free Trade
Agreement. Belgian brewers will find the contact details of their local customs office under the following link:
https://finances.belgium.be/fr/douanes_accises/prendre-contact-avec-le-agda
AWEX-HUB SEOUL 2019 Page 12/16Other Taxes
Depending on the type of alcoholic beverage, the Korean government imposes a different ‘Liquor tax’-rate. The liquor tax rate of beer is 72%. The
other taxes which apply are as below:
Category Rate Remark
Import Tariff* 0% Under the FTA, USA and EU import beer’s tariff rate is 0%
Liquor Tax on beer 72% Currently, the liquor tax is based on the beer price10
Education Tax 30%
Value Added Tax 10%
For example, the import-tariffs and tax-rates that will be imposed to the Belgian beers are as below:
Category Rate
A Beer Price* $1.00
B Import Tariff 0% $0
C Liquor Tax 72% (A+B) x 72% $0.72
D Education Tax 30% C x 30% $0.22
E Value Added Tax 10% (A+B+C+D) x 10% $0.19
$2.13
*Beer Price: Ex-work invoice value + transportation cost (inland + shipping)
Other cost to add to reach the consumer price:
The margin of the importer, the margin of the retailer, repackaging (labeling), inland transportation, warehousing, marketing costs.
10
The Korean government plans to change the ‘Liquor tax’ from a price-based-system to a quantity-based-system.
AWEX-HUB SEOUL 2019 Page 13/168. Related trade fairs and business federations
◼ Trade Fairs
Name Organizer Website Information on the previous or on the future trade fair
◼ WMW in 2019
- Date : 11.29(Fri) ~ 12.01(Sun)
- Venue : Kintex
WMW
World Expo - Scale : 200 booths
(Wine Meets World https://wine.world-expo.co.kr
Co., Ltd ◼ WMW 2018
Korea)
'- Date : 11.30(Thu) ~ 12.02(Sun)
- Venue : Kintex
- Scale : 103 booths, 69 companies from 13 countries
SIWSE Korea ◼ SIWSE 2020 (there will be AWEX booth)
(Seoul International International - Date : June 12(Fri) ~ 14(Sun), 2020 / 3days
http://www.siwse.com/
Wines & Spirits Exhibition - Venue : Coex Hall C / Seoul, Korea
Expo) Co., Ltd - Sponsors : WOSA / USATO / KOREA WINE ASSOCIATION / WINE VISON /
Int’l Beer & Equipment Industry Exhibition BREWORX / LIQUOR JOURNAL
(it is held together with SIWSE) ◼ SIWSE 2019
www.beerexpokorea.com Date June 20(Thur.)~ 22(Sat.), 2019, Venue COEX Hall C, Scale 10,348 sqm,
Number of exhibitors: 240 companies from 20 countries, Number of Visitors:
WTA
35,789 visitors, Sponsors: WINES FROM SPAIN / WOSA, SOPEXA / USATO /
(World Traditional Alcoholic Beverage Festival)
KOREA WINE ASSOCIATION /KOREA SOMMELIER ASSOCIATION / KOREA
(it is held together with SIWSE)
www.beerexpokorea.com BARTENDERS ASSOCIATION
AWEX-HUB SEOUL 2019 Page 14/16◼ KIBEX 2020
- Title : KOREA INTERNATIONAL BEER EXPO (KIBEX 2020)
KIBEX - Date : Mar. 19 (Thu) – 21 (Sat), 2020 (3 days)
(KOREA GMEG, The - Venue : aT Center, Seoul, Korea
www.beerexpo.kr
INTERNATIONAL BEER POST - Hosted by GMEG, The BEER POST
BEER EXPO) - Concurrent Event : International Beer Conference, KIBEX Tap Room, Beer
Competition, Unveiling Stage & New Product Showcase, KIBEX Seminar, Asia Beer
Club, KIBEX Networking Night
◼ Korean business federations:
Korea Wines & Sprits Importers Association (www.kwsia.or.kr/html/index/)
KMBIA (Korea Micro Beer Importers Association) (www.kmbia.co.kr/)
KOREA WINE ASSOCIATION
KOREA SOMMELIER ASSOCIATION (http://www.somme.co.kr/)
AWEX-HUB SEOUL 2019 Page 15/169. Current issues and trends
◼ Japanese beer sales in the market dropped from 1st place to 27th place through the boycott Japan movement
- Related news article: http://koreabizwire.com/imported-beer-brands-compete-for-top-spot/146498
Due to the South Korean boycott of Japanese products since July 2019, Japanese beer sales dropped significantly. According to the KCS11,
Japanese beer had the largest share in the imported beer market in South Korea for 10 years but now they rank 27th. Chinese beers have
taken the hole in the market which was left by Japanese beer.
➔ The boycotts of Japanese beers are expected to continue and it could be an opportunity for Belgian brewers. There are importers, which
have heavily relied on Japanese alcoholic beverage and which are now looking for beers from the EU and from the USA.
◼ Change of the liquor tax from a price-based to a quantity-based tax:
- Related news article : https://www.koreatimes.co.kr/www/tech/2019/04/694_267474.html
The current liquor tax base for Korean domestic beer includes manufacturing costs, profit as well as general and administrative expenses. For
imported beer, the tax base is the import price.
In 2018, the average liquor tax for domestic beer was estimated at 848 won (US$0.70) for a liter while that of imported beer is believed to be
709 won. Under the change, South Korea will uniformly levy 830.3 won in liquor tax per liter for either local or imported beer. It is not
confirmed yet when the new ‘Liquor tax’-system will be introduced.
➔ Although it is intended to benefit domestic brewers, the negative impact on Belgian beer sales will be limited. Moreover, on the contrary,
some Belgian premium beer could benefit from it.
11
Korea Customs Service (www.customs.go.kr)
AWEX-HUB SEOUL 2019 Page 16/16You can also read
